Tobacco farmers will yet again retain 50 percent of net sales in foreign currency in the upcoming selling season as government continues to strictly regulate foreign currency earnings distribution, 263Chat Business can report.
Last year tobacco growers called for a review of the 50 percent threshold after facing challenges in repaying loans acquired in foreign currency from contractors.
However, government has since addressed this challenge by ensuring that loans acquired in foreign currency by the growers will be settled in foreign currency upon sale of tobacco with the remaining figure settled partly in foreign currency and the equal remainder in local currency.
“Tobacco growers who have contracted loans in foreign currency shall pay the loans in foreign currency and as such upon sale of the tobacco, the foreign loans shall be payable and deducted from the proceeds of the sale of the tobacco and thereafter 50% of the sale proceeds shall be paid in foreign currency and the other 50% will be converted at the applicable exchange rate on the day of sale and paid in local currency,” a joint statement from the Reserve Bank of Zimbabwe (RBZ) and the industry regulator, Tobacco Marketing Board (TIMB) read.
“The 50% foreign currency portion shall be paid directly into the growers’ foreign currency bank accounts (FCAs) and the 50% local currency portion directly into the growers’ local currency bank accounts or e-wallets on the day of the sale. Tobacco growers who do not have FCAs are advised to open FCA accounts,” it further stated.
To facilitate adequate preparations and importation of inputs for the next growing season, the foreign currency entitlements for growers shall be treated as free funds and may be retained in their FCAs for an indefinite period.
Holders of such funds are permitted to conduct inter-FCA transfers or effect foreign payments without any restrictions and the FCA balances will not be subject to any liquidation requirements, further read the statement.
Tobacco is a major foreign currency earner for the Zimbabwean economy which is in dire stress of depleted foreign reserves.
In September 2019, the country had recorded a record sale of 257 547 838 kgs of the golden leaf.
The RBZ Governor, Dr John Mangudya has on several occasions defended the foreign currency retention scheme saying this has provided substantial funds for the Bank to meet external obligations.
